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Labor Markets

Paper Session

Sunday, Jan. 3, 2021 12:15 PM - 2:15 PM (EST)

Hosted By: American Economic Association
  • Chair: Logan Lee, Grinnell College

How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Data Sets

Asger Lau Andersen
,
University of Copenhagen
Amalie Sofie Jensen
,
Princeton University
Niels Johannesen
,
University of Copenhagen
Claus Thustrup Kreiner
,
University of Copenhagen
Søren Leth-Petersen
,
University of Copenhagen

Abstract

How do households respond to job loss, and which self-insurance channels are most important? By linking customer data from the largest bank in Denmark with information from government administrative registers, we quantify a broad range of responses to job loss in a unified empirical framework. Existing studies typically analyze a single response margin, with samples, data, and methods varying across studies. In contrast, our study provides a comprehensive assessment of the relative importance of each margin by analyzing all responses for the same sample of households, applying the same definition of job loss, and using the same research design. We find a significant and persistent income loss for the average person affected by job loss, despite extensive social insurance. The effect on monthly disposable income of the household is a drop of 30% on impact and close to 10% two years after the job loss. Household spending also drops significantly, but far less than income: Two years after job loss the cumulative spending drop amounts to 30% of the cumulative income loss, leaving a gap of 70% that reflects the effects of household self-insurance. We find that this gap is filled by lower accumulation of liquid assets (~50%), increases in private transfers and other inflows (~10%), higher spousal labor supply (~5%), and lower net debt repayments (~5%). The combined effect of these responses closely matches the income loss in each month following job loss, suggesting that the analysis captures all relevant margins. We conclude that reduced saving in liquid assets is the single most important way that households self-insure against job loss.

Robots, Labor Market Frictions, and Corporate Financial Policies

Alice Liu
,
University of Arizona

Abstract

Using a novel dataset from the International Federation of Robotics (IFR), I find that robots can transform the labor market landscape and mitigate the impact of labor market frictions on financial policy decisions. Firms with more robots, which reduce labor adjustment costs and operational risk, have higher financial leverage and hold less cash. Such firms rely less on employees and attach less importance to gaining a bargaining advantage over unions. The effects of robots on corporate financial policies are stronger for firms with more blue-collar workers. When facing greater foreign competition, firms with more robots are able to adopt less conservative financial policies. The effects of minimum wage increases on corporate financial policies are weaker for firms with more robots.

Cheap Thrills: the Price of Leisure and the Global Decline in Work Hours

Alexandr Kopytov
,
University of Hong Kong
Nikolai Roussanov
,
University of Pennsylvania
Mathieu Taschereau-Dumouchel
,
Cornell University

Abstract

The real price of recreation goods and services has fallen dramatically over the last century.
At the same time, hours per worker have also been on a steady decline. As recreation goods
make leisure time more enjoyable, we investigate if the fall in their price has contributed to the
decline in work hours. Using aggregate data from OECD countries, as well as disaggregated
data from the United States, we provide evidence that the two are strongly related. To identify
the effect of recreation prices on hours worked, we use variation in the bundle of recreational
goods across demographic groups to instrument for the changing price of leisure faced by these
groups over time. We then construct a macroeconomic model with general preferences that
allows for trending relative prices and work hours along a balanced growth path. We estimate
the model and nd that the decline in recreation prices has been as important as the rise in
wages in explaining the decline in work hours in the U.S.

What drives trends in employment to population ratios?

Huiyu Li
,
Federal Reserve Bank of San Francisco
Nicolas Petrosky-Nadeau
,
Federal Reserve Bank of San Francisco

Abstract

We propose a model of equilibrium employment to population ratios with random search and endogenous participation. Individuals are heterogeneous in their ability for market work, utility from non-market activities and bargaining power in setting wages. We use the model to assess the contributions of several competing explanations for trends in employment to population ratios for different demographic groups in the U.S. over the last four decades.

Intangibles, Concentration, and the Labor Share

Lichen Zhang
,
University of Hong Kong

Abstract

Over the past three decades, the U.S. business sector has been characterized by increasing concentration and decreasing measured labor share. Over the same period, investment in BEA-measured intangible capital, mainly software & R&D, has grown rapidly as a share of total business income. This paper develops a quantitative general equilibrium model of firm dynamics, showing that an intangible-investment-specific technical change (IISTC) plays a key role in understanding the trends in measured labor share and concentration jointly. The model is consistent with important aspects of firm behavior at the micro-level. The IISTC shifts the distribution of firms toward large, intangible-intensive firms with low labor shares. When the IISTC is calibrated to match the observed decline in the relative price of intangible investment goods, the model can account for a significant part of the observed rise in concentration and the observed decline in the measured labor share jointly.

Connect and Protect: The Role of Trade, Technology, and Labor Policies on Informality

Jennifer P. Poole
,
American University
Rita K. Almeida
,
World Bank
Lourenco S. Paz
,
Baylor University

Abstract

Several episodes of market-oriented reforms in developing countries have been accompanied by a significant rise in work outside of the formal economy. In addition, according to a large literature for the developed world, the rapid development of communications technologies is related to the polarization of the labor force. A growing body of literature has investigated whether these two effects on formal workers are mediated by the strength of labor enforcement. In this paper, we combine these three lines of research to consider the implications of rigid labor market policies on informality, in the aftermath of trade liberalization and technological progress. We hypothesize that strict labor policy may reinforce trends toward widening wage dispersion, job polarization, and contribute to rising informality, in part, as low-wage, low-skilled job opportunities in low-productivity formal establishments diminish. In our investigation, we employ data from the Brazilian decennial Census that provides a wealth of information on workers' demographic and employment characteristics, including job formality status. We also exploit quasi-exogenous changes in industry-level real exchange rates and advances in broadband internet technology to explore the likelihood of informality across Brazilian employers exposed to varying degrees of de facto labor regulations, as measured by Ministry of Labor inspections.
JEL Classifications
  • E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy